SpaceX IPO draws record demand, strains retail platforms as OpenAI and Anthropic file

Elon Musk’s rocket-and-AI company has soared since its IPO, briefly becoming the fourth-most valuable company on Wall Street. The next test comes when earnings arrive and insider lockups start to expire.

These three letters – I, P and O – excite emotions like few others in finance.

Bankers for Elon Musk’s SpaceX are preparing to hold calls with investors as soon as next week to discuss a potential bond offering on the heels of the company’s record IPO, according to people with knowledge of the matter.The bond is expected to be at least $20 billion, and the calls may kick off on Monday, said the people, who asked not to be identified because they’re not authorized to speak publicly. Plans and timing may change, they said.Musk’s rocket, satellite and AI conglomerate is planning to issue investment-grade US dollar bonds for the first time. The bond proceeds would refinance a temporary $20 billion bridge loan that matures in September 2027.The bridge loan makes up the bulk of SpaceX’s $29.1 billion of long-term debt as of March 31, the company said in its IPO filing with the Securities and Exchange Commission.Also Read | SpaceX's historic IPO rally hits first speed bump – What's next for investors?Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co., Goldman Sachs Group Inc. and Morgan Stanley provided the bridge financing and are expected to run the deal, the people said. SpaceX and Bank of America didn’t respond to requests for comment. Citigroup, Goldman Sachs, JPMorgan and Morgan Stanley declined to comment.SpaceX’s historic initial public offering turned the start-up into one of the world’s most valuable public companies and turned its founder into the world’s first trillionaire. The company’s embrace of AI with the acquisition of Musk’s xAI in February made the listing somewhat of a referendum on the IPO prospects of competitors Anthropic PBC and OpenAI, both of which plan to go public as soon as this year. The company has told investors it has lined up investment-grade ratings from three major bond graders, paving the way for cheaper borrowing as it continues to raise financing after its IPO. Musk has utilized debt markets extensively to buy or grow his businesses, securing billions in bank commitments and structuring complex financings. But it hasn’t all been smooth sailing. His 2022 buyout of Twitter loaded the company with roughly $12.5 billion of borrowings, creating a notorious hung debt quagmire for Wall Street banks who were initially unable to sell it to investors. They ultimately succeeded in doing so last year.“The company will likely want to establish a track record in debt markets soon,” said CreditSight’s analyst Matt Woodruff ahead of the potential bond sale. “They will need money down the road for capital expenditure so from that perspective, the sooner the better,” he said.In its filing, SpaceX said capex will increase “substantially” in the future and that it planned to use “a range of debt and equity financing solutions” to fund future investments.SpaceX had a net loss of $4.28 billion on revenue of $4.69 billion for the first quarter, compared with a net loss of $528 million on revenue of about $4 billion a year earlier.But it has some key contracts that will generate future revenue, including a deal with Alphabet Inc.’s Google, which has agreed to pay SpaceX $30 billion for computing power under a cloud services deal that runs through mid-2029. It also has a roughly $45 billion deal with Anthropic PBC over about the next three years.

Two days after going public, SpaceX is already bigger than both Amazon and Microsoft. With Tuesday’s early market gains adding to Monday’s advance, Elon Musk’s rocket-and-AI company boasted a market cap of $2.95 trillion as of 10:05 a.m. ET. That put it ahead of Amazon’s $2.66 trillion and briefly above Microsoft’s $2.93 trillion. It has since fallen below Microsoft’s market cap again. It’s a remarkable feat, one that defies rational explanation but underscores investors’ intense appetite for AI—and the magnetic draw of Elon Musk. With the boost, SpaceX briefly became the fourth-largest company on Wall Street by market value. It currently sits at fifth. Apple is currently the third-largest publicly traded company on Wall Street, with a $4.4 trillion market cap. Alphabet stands at $4.5 trillion, and Nvidia leads the pack at $5.1 trillion. Up, up and away It has been a remarkable short run for SpaceX, which began trading midday Friday with a market cap of just under $1.8 trillion. The surge in valuation is even more notable because many Wall Street analysts have warned investors that the company appears artificially inflated. Prior to the IPO, Morningstar launched coverage of SpaceX, with analyst Nicolas Owens saying his fair value estimate of the company was roughly $780 billion—less than half of the company’s target at the time. “We think the company has been significantly overvalued and investors will have opportunities to buy the stock at more attractive levels after the IPO,” he wrote. He wasn’t alone in his warnings. Aswath Damodaran, a professor at NYU’s Stern School of Business best known as the “dean of valuation,” said he believed SpaceX’s equity value was roughly $1.3 trillion, nearly half a trillion less than the company claimed. And Ed Elson, an analyst who also co-hosts the Prof G Markets podcast with entrepreneur Scott Galloway, said the pre-IPO valuation defied all logic. “The stock is set to be priced at 107 times sales, which would make it one of the most expensive stocks in history,” Elson wrote on his Substack. “It will be twice as valuable [as] Walmart while generating less revenue than Macy’s.” Investor exuberance It’s not uncommon for an IPO to soar in its first few days on the market, particularly one as hyped as SpaceX. Offerings are often timed to land at the peak of investor excitement. And there could be more room for SpaceX to climb. But gravity is an irresistible force, even on Wall Street. A recent study by Truist of 30 major IPOs found that all finished their first year with stock prices that were notably lower. The most successful of those companies was down 20% after one year. The worst tumbled 90%. On average, the first-year drawdown was 55%. SpaceX is also looking at an unusual lockup period for its workers. Typically, employees are restricted from selling their shares for 180 days. SpaceX will allow some insiders to sell up to 20% of their locked-up shares after the company reports earnings for the three months through June. And if the stock is trading at least 30% above the IPO price at that time, they can sell another 10%. From there, it’s a rolling schedule, with another 7% unlocking at the 70-, 90-, 105-, 120-, and 135-day post-IPO marks. After SpaceX files its second earnings report, another 28% can be sold. Whatever is left at the 180-day mark can be sold at will. Amazon isn’t likely to see the volatility that could be ahead for SpaceX, barring a larger market meltdown. The company’s fundamentals remain strong and are supported by current revenue and sales, not an estimate of future income. SpaceX might be surpassing Wall Street’s biggest companies today—and could join them on a permanent basis someday—but this current game of market-cap leapfrog is likely to be short-lived once earnings come out and lockups expire.

Fresh from its Wall Street debut, SpaceX rallies nearly 17% as investors back Elon Musk's ambitious push into artificial intelligence through the $60 billion Cursor acquisition.

Fresh from its Wall Street debut, SpaceX rallies nearly 17% as investors back Elon Musk's ambitious push into artificial intelligence through the $60 billion Cursor acquisition.